Peninsula localities stand guard over BPOL tax

Cities, businesses, spar again on local taxes as broader reforms loom

January 22, 2014|By Travis Fain, tfain@dailypress.com

RICHMOND – City leaders across the state — and particularly on the Peninsula — are keeping a close eye this session on the annual push to tinker with business taxes that generate a chunk of local revenue.

Legislation that would rework Business, Professional and Occupational License taxes – which usually go by the acronym BPOL – was supposed to come up Wednesday in a House Finance subcommittee, but members decided to delay that discussion until at least next week. Bills that alter the machinery and tools tax – which is particularly important in Newport News – are also awaiting action, or death, this session.

It's possible they'll all get rolled into a larger effort to study state and local taxes as a whole. In the meantime, city leaders want to avoid blowing holes in their budgets, or raising property taxes to fill them.

In Newport News the BPOL tax brought in $16.2 million last year, city lobbyist Jeri Wilson said. The machinery and tools tax brought in $19.8 million. That's out of a $416 million operating budget that includes funding for schools, as well as regular city operations.

"We don't have any way to replace (that money)," Wilson said. "It's not that we are particularly attached to any one tax."

Reworking these taxes is a priority for business interests at the capitol. House Bill 371 would charge the BPOL tax on net revenues instead of gross receipts, for example. The current tax is based on total revenues and doesn't take into account whether a business actually makes a profit, according to Nicole Riley, Virginia director for the National Federation of Independent Business.

Plus, the BPOL tax was initially levied to help fund the War of 1812, according to Riley and a number of other sources.

"I think we're pretty much beyond that," Riley said.

If the legislature tinkers with these taxes, it will likely back-fill local government budgets, according to House Majority Whip Jackson Miller, R-Manassas.

"I don't think we'll do anything that doesn't have a replacement," Miller said Wednesday.

Possible revenue replacement sources? A new sales tax on services, Riley said. Or an end to some of the tax credits and exemptions that dot Virginia's tax code.

Either one could be a tough sell. New sales taxes would hit just about everyone. Tinkering with tax exemptions would target business sectors that are typically protective of their tax breaks.